Abu Dhabi, UAETuesday 21 May 2019

Ryanair to restructure after posting €20m loss

Europe's largest low-cost airline, hit by lower fares, will set up four separate subsidiaries, each with its own CEO and management

Irish carrier downbeat on outlook after posting loss and plans new strategy similar to IAG. AP
Irish carrier downbeat on outlook after posting loss and plans new strategy similar to IAG. AP

Ryanair reported on Monday a €20 million (Dh84.1m) loss in the third quarter on weaker fares, which it expects to continue throughout the year.

Low fares had led the company two weeks ago to cut its full-year profit forecast for the second time in three months.

Ryanair expects its profit for the year to March to fall by up to 31 per cent due to a mix of summer strikes, higher oil prices and short-haul overcapacity in Europe, again warning on Monday that it could not rule out a further downgrade.

Europe's largest low-cost airline, which makes most of its profit in the summer, said it expected the continued short-haul overcapacity to lead to a weaker – not stronger – fare environment.

"We do not share the recent optimistic outlook of some competitors that Summer 2019 airfares will rise," the Irish airline said.

"In the absence of further EU airline failures, and because of the recent fall in oil prices [which allows loss-making unhedged competitors to survive longer], we expect excess short haul capacity to continue through 2019."

Ryanair said in its profit warning last month that its fares in the second half of its financial year were set to fall by 7 per cent, rather than the 2 per cent previously estimated, reported Reuters. In the third quarter, strong traffic growth of 8 per cent was offset by a 6 per cent decline in average fares while a 26 per cent increase in ancillary revenues to €557m was offset by higher fuel and staff costs.

Also on Monday, Ryanair unveiled plans for an overhaul to create four subsidiaries.

Mirroring a set-up by British Airways and Iberia owner IAG, Ryanair said it planned to have four distinct operations, each with its own chief executive, reported Agence-France Presse. Chief executive Michael O'Leary will head up the overall group, Ryanair said.

Under him will be Ryanair DAC overseeing the Irish operations and there will be also Ryanair UK, Laudamotion for its Austrian business and Ryanair Sun, or the Polish unit.

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"Having agreed this group strategy as the best way to grow Ryanair, Sun, Lauda and other possible airline brands, Michael O'Leary has agreed a new five-year contract as group CEO," the carrier said.

The airline added: "Over the next 12 months Ryanair Holdings will move to a group structure not dissimilar to that of IAG.

"A small senior management team will oversee the development of four airline subsidiaries ... [focusing] upon efficient capital allocation, cost reductions, aircraft acquisitions and small scale M&A opportunities," the company said

Chairman David Bonderman, a controversial figure who has occupied the position since 1996, will also stand down next year, according to Ryanair. The change will remove the biggest focus of opposition to the discount giant’s current leadership team, Bloomberg said. Mr Bonderman will be replaced by Stan McCarthy, who will take up the position of deputy chair in April of this year.

Ryanair also reiterated its concerns over Brexit.

"The risk of a 'no-deal' Brexit remains worryingly high. While we hope that common sense will prevail, and lead to either a delay in Brexit, or agreement on the 21 month transition deal currently on the table, we have taken all necessary steps to protect Ryanair's business in a no-deal environment."

Britain accounts for about one-quarter of revenues at Ryanair, causing the airline to warn frequently about potential fallout from the UK's rocky path to exiting the European Union.

Updated: February 4, 2019 03:06 PM

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